A _____ bond pays no interest during its life, but imputed interest is still taxable.

A) convertible
B) zero coupon
C) callable
D) seasoned

Zero Coupon

A type of bond that does not pay periodic interest payments but instead is sold at a deep discount from its face value and pays its full face value at maturity.

Imputed Interest

The assumed interest rate used by the IRS for tax purposes on loans with little or no interest, to ensure that tax is collected on essentially interest-free loans.